General Disposition DPPJ 18/2012 – Controls on foreign companies

28/07/2012

On May 4, 2012 the General Disposition No. 18/2012 (the “Disposition”) of the Provincial Department of Corporations (“DPPJ”) was published in the Official Gazette.

The Disposition reorders the DPPJ standards and modifies certain aspects which reflect some of the principles currently applied by the Public Registry of Commerce in relation with foreign companies. These principles are aimed at verifying the correct compliance by the companies of the Argentine legislation.

In relation with the registration of foreign companies, the Disposition provides that they must submit together with the corresponding documentation, the last financial statement, with accounting report of the country of origin, converted and adapted to the professional standards for the conversion of financial statements.

Also, the foreign companies shall report the registration in other jurisdictions of branches or permanent representations, indicating all the information of such inscriptions.

For the purposes of control of legality, departments involved in registration procedures of acts, contracts, and business of companies registered before the DPPJ, shall control the participation of foreign entities in the formation of social capitals.

The Disposition provides the application of the sanctions of Sections 7 and 8 of the Decree Law No. 8671/76 -warning, fine of up to the amount of ten (10) minimum salaries of provincial public administration, withdraw of the legal personality- on managers and directors that allow foreign companies to acquire shares without the compliance of Section 123 of the Corporate Law, whichever the method used and the participation in shareholders meetings.

Additionally, foreign companies, that count or not with a permanent representation or branches in Argentina, and voluntarily decide to settle in Argentina, shall adequate their functioning to the provisions of the Corporate Law and comply with the rules set forth by the Decree Law No. 8671/76, the Disposition, and other applicable regulatory estates.

Regardless of the form of adequacy -voluntary or officially- companies are required to adapt one of the types of companies stated in the Corporate Law, and inform to the Tax Authorities about the new adopted legal frame.

Finally, the Disposition provides the obligation to submit an affidavit on the status of being a politically exposed person by administrators, members of the control body of the company, legal representatives of foreign entities, members of the boards of civil partnerships, and members of the boards of foundations. Such affidavit must be filed at the time of requesting the registration, authorization to operate, or with each change of administration.